Cameroon, Congo hold key to Sundance deal

The governments of Cameroon and the Republic of Congo will have a crucial say over Hanlong Mining’s proposed $1.65 billion takeover of
Sundance Resources
.

After almost three months of negotiations, the Sundance board late on Monday night endorsed a 57¢-a-share bid from Hanlong, its largest shareholder and part of the privately owned Chinese conglomerate Sichuan Hanlong.

The offer price was 7¢ higher than the first proposal put forward by Hanlong, which was declared inadequate by Sundance.

“To sum it up, they think they paid too much and we think they didn’t pay quite enough, which probably means that we got it about right in the end," Sundance chairman
George Jones
said yesterday.

The announcement of the deal pushed Sundance shares up 3.5¢, but they finished well short of the offer price at 46.5¢, suggesting investors still have doubts about the chances of the deal’s completion.

Stockbrokers and fund managers expressed concern over the two-phase structure, which requires mining conventions for the $US4.7 billion Mbalam iron ore project to be ratified with the governments of Cameroon and the Republic of Congo before anything else.

“Hanlong has effectively agreed to buy the company after it has been derisked," John Robertson, a director of EIM Capital Managers and a Sundance shareholder, said. “That leaves existing shareholders carrying the can until Hanlong has more certainty.

“Shareholders are no better off. Their investment return still depends on getting the relevant mining approvals and having funding in place."

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Mr Jones said Sundance and Hanlong had allowed eight weeks to have the conventions ratified, but indicated that the milestone could be achieved sooner.

Delegations from each company are due to travel to Cameroon within the next two weeks to speak with both governments and Mr Jones is confident of success. “They are wanting this to happen," he said. “In Cameroon the project will represent 8 per cent of their GDP. It will be the largest single project in that country."

Sundance has provided its recommendation of the Hanlong offer in the absence of a superior proposal and subject to the receipt of an independent expert’s report declaring it to be in the best interests of shareholders.

Other requirements for the takeover to go ahead are regulatory approvals from China and Australia and approval from Sundance shareholders. Under the proposed schedule, Sundance and Hanlong envisage the scheme booklet being lodged in February ahead of the scheme meeting in April.

The scheme implementation date would be early May.

Extra drama was added to the takeover last month when it was revealed that the Australian Securities and Investments Commission was investigating five Hanlong employees on the suspicion of insider trading.

No charges have been laid against the five, but it is thought they bought shares in Sundance and uranium explorer Bannerman Resources in the knowledge that the companies would soon receive takeover proposals.

Travel restriction and asset freezing orders have been imposed on them until at least the middle of next month.